MBS RECAP: Widespread Negative Reprices as Sell-Off Gets Real

By: Matthew Graham •

10yr yields have gone from around 2 percent to 2.17% in 2 days thanks to the Fed's sucker punch.  Mind you, this would be a lot worse if some of the market wasn't already wondering if the Fed would take this opportunity to set the expectation for a strong possibility of a December rate hike.  Still, it left many market participants surprised, and they've subsequently had to get with the program in fairly short order.

In today's case, all we know is that it wasn't time to stop selling yet.  GDP data was a supporting player in the weakness as Final Sales came in at +3.0 vs +2.8 median forecast.  German inflation data (yeah, that matters) also surprised to the upside.  By the time Pending Home Sales flopped at 10am, bond markets were in momentum mode.  Tuning out 2nd tier data was little to ask at that point.  The selling didn't let up until after the 1pm 7yr Treasury auction and even then, it merely flattened out.

Technicals and momentum are in full blown bear-mode.  Best bet is to respect it and plan on continuation until it gives us a clear signal that we've found support. 

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.0
100-28 : -0-12
FNMA 3.5
103-30 : -0-08
FNMA 4.0
106-10 : -0-06
Treasuries
2 YR
0.7280 : +0.0210
10 YR
2.1720 : +0.0710
30 YR
2.9630 : +0.0850
Pricing as of 10/29/15 5:29PMEST
Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
10:29AM  :  ALERT ISSUED: FN 3.0 Down 9/32nds; Negative Reprice Risk Increasing
9:41AM  :  ALERT ISSUED: Fannie 3.0 Down 5/32nd Since 9am; Some Reprice Risk for Early Lenders
9:38AM  :  Bond Markets on the Run Following GDP and German Inflation Data
MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Hugh W. Page  :  "You could look at a word cloud on MBS Live and easily make that assumption :)"
Matthew Graham  :  "it is"
Christopher Stevens  :  "MG- corp bond issuance has to be close to a record this year"
Matthew Graham  :  "How Does Corporate Debt Issuance Affect Mortgage Rates?"
Matthew Graham  :  "$13 billion Microsoft corporate bond just launched. Looks like some Treasury sales on the news or possibly directly connected via hedging."
Tom Bartlett  :  "you have a large range Hugh... Keeps worry to a minimum,"
Tom Bartlett  :  "seems like the 50 dma needs to hold to maintain hope of holding these prices or better..."
Hugh W. Page  :  "No reason to start worrying until we break 2.27"
Christopher Stevens  :  "Now that we have moved across the 2.13 line I wonder if the 10YR will settle in to a new range similar to Septembers 2.13-2.21 or do we head back below."
Matthew Graham  :  "RTRS - HIGH YIELD AT LATEST 7-YEAR NOTE SALE WAS LESS THAN 1 BASIS POINT BELOW ITS 1 P.M. WHEN-ISSUED LEVEL - REUTERS DATA"
Matthew Graham  :  "RTRS - U.S. 7-YEAR NOTES BID-TO-COVER RATIO 2.55, NON-COMP BIDS $10.39 MLN"
Matthew Graham  :  "RTRS - U.S. SELLS $29 BLN 7-YEAR NOTES AT HIGH YIELD 1.885 PCT, AWARDS 44.64 PCT OF BIDS AT HIGH"
Matthew Graham  :  "for those totally confused by my last chat: http://www.mortgagenewsdaily.com/mortgage_rates/blog/242898.aspx"
Matthew Graham  :  "Recent average bid-to-cover for 7yr auction is 2.47. yields have been lower than expected 4 out of the last 6 times, but were higher the previous 7 in a row. The average beat is .1bp. Indirects average 55%. Current when-issued is 1.884."